Javascript is not enabled.

Javascript must be enabled to use this site. Please enable Javascript in your browser and try again.

Skip to content
Content starts here
Leaving Website

You are now leaving and going to a website that is not operated by AARP. A different privacy policy and terms of service will apply.

Student Loan Borrowers In Default Can Get A Fresh Start

New program will delay collection efforts and clear credit reports

spinner image a piggy bank wearing a graduation cap
Nuthawut Somsuk/Getty Images

Student loans are a big issue for people 50 and older, who own about 22 percent of all student loans outstanding. For those borrowers who are in default, a U.S. Department of Education (DOE) program called Fresh Start could be a big help. ​

AARP Foundation partnered with Savi to enable users to determine if they qualify for a federal program that can lower or eliminate monthly payments based on income. The program, which began in April 2022, can stop collection efforts, move your debt out of default and help you with loan forgiveness. Although the DOE will reach out to most borrowers, you need to make payment arrangements during the Fresh Start initiative or you will be subject to default collections one year after the federal moratorium on collecting student loan payments ends.​

spinner image Image Alt Attribute

AARP Membership— $12 for your first year when you sign up for Automatic Renewal

Get instant access to members-only products and hundreds of discounts, a free second membership, and a subscription to AARP the Magazine.

Join Now

A respite for borrowers

Federal student loan borrowers  had their payments paused from March 2020 to October 2023 because of the COVID-19 pandemic. The DOE also halted collection efforts for those who have defaulted on their student loans. For those who have defaulted on federal student debt — direct loans, Federal Family Education Loan (FFEL) program loans and Perkins loans — collection efforts can include garnishment of your paycheck and tax return and even up to 15 percent of your monthly Social Security payment.

Student loans aren’t generally subject to discharge in bankruptcy, but on Oct. 4, 2023 the White House announced debt relief through changes it has made to income-driven repayment (IDR) and Public Service Loan Forgiveness, and by cancelling debt for borrowers with total and permanent disabilities. Today’s announcement brings the total approved debt cancellation to $127 billion for nearly 3.6 million Americans.

Here’s what Fresh Start offers:​

  • Access to repayment programs as well as loan forgiveness. In the case of an income-driven repayment plan (IDR), payments could be as low as zero.
  • Eligibility for student aid. If you were hoping to get a higher-paying job because of your college education but weren’t able to complete your degree, you may be able to get financial aid to finish your studies. Your defaulted student loan will get an in-school deferment while you’re back in school, and you’ll be eligible for federal Pell Grants and work-study programs.
  • Protection from collection efforts. Eligible borrowers will have at least one year to make payment arrangements before defaulting on their debts and/or being subject to further collection efforts.
  • Removal from the federal Credit Alert Verification Reporting System. This could improve your credit rating and make it easier to get federal jobs or housing.

How to get a fresh start

If your loan is in default, you’ll have to make payment arrangements with the DOE or your loan servicer to be eligible for Fresh Start. If you have eligible defaulted loans, you can make payment arrangements during the initiative by visiting, contacting your loan holder by phone or in writing, or calling the DOE’s Default Resolution Group at 800-621-3115.

When you make your payment arrangements, you’ll be transferred to a loan service that doesn’t specialize in collecting defaulted loans, and the DOE will remove the default from your credit report. After your status has returned to good standing, you will be eligible to enroll in an IDR plan to make your payments more affordable (or as low as zero dollars).

Some defaulted loans are not eligible for Fresh Start loans: School-held Perkins loans, Health Education Assistance Loan (HEAL) program loans, and direct loans and commercial-held FFEL program loans that default after the end of the pause on student loan payments and collections.

Discover AARP Members Only Access

Join AARP to Continue

Already a Member?